Lebanese Banks and Credit Libanais

The Lebanon banking sector has grown markedly over the last years with total assets nearing $120 billion as at the end of the first quarter of 2010, customer deposits exceeding the $99 billion mark and loans to the private sector firming at $25.79 billion.


Interview with Dr. Joseph Torbey, President of the Association of Lebanon and Chairman of Credit Libanais

How healthy is the banking sector in Lebanon and is public debt a cause of concern?

The Lebanon banking sector has grown markedly over the last years with total assets nearing $120 billion as at the end of the first quarter of 2010, customer deposits exceeding the $99 billion mark and loans to the private sector firming at $25.79 billion. The banking sector remains highly liquid with the loans to deposits’ ratio standing at 26.01% as at end of the first quarter of 2010, thanks to banks’ prudent lending policies and stringent regulations of Banque Du Liban.

The Lebanon banking sector is solvent and highly capitalized with a BIS capital adequacy ratio hovering around 12.5%, way above the minimum 8% required by the Basel II committee.


The efficient monetary policy of the Lebanese Central Bank has always been admired and praised by international rating agencies for its constructive role in fostering economic growth while at the same time shielding the Lebanese banking sector sector from international and domestic shocks.

With a rating equivalent to that of the Lebanese government, the Lebanese banking sector continues to be the backbone of the economy and maintains its pivotal role in smoothing government public finances and alleviating internal public debt burden.

Given the revitalized level of confidence in the Lebanese economy, a declining interest rate environment (thus a lower debt service), a balance of payments surplus of $978.10 million in the first quarter of 2010 and a record high level of foreign reserves reaching $30.24 billion as at the end of May 2010, the government’s hefty debt burden should not be a cause of concern supported by the long history of the government’s clean record of honoring its debts. It is worth noting that the Lebanese government has instigated a series of fiscal and monetary reform measures in the aftermath of Paris II and Paris III conventions and has succeeded in smoothing public finances, with the debt to GDP ratio dwindling to around 150% in 2009 down from 180% in 2006, with expectations for the ratio to dip to around 141% in 2010 according to Moody’s Investors Service which also projected the government’s fiscal deficit to GDP ratio to shrink to 9.0% in 2010 and 6.3% in 2012 down from 13.5% in 2006.

Is income from outside investment a cause of concern, especially in the real estate sector?

The steady flow of foreign capital and remittances into the Lebanese economy since the pre-war period and until present times is unquestionably a subject of praise by international rating agencies and a growth catalyst that resuscitate the economy at times of political turbulence.   The Lebanese economy has always succeeded in attracting foreign investments, capital inflows and foreign remittances in spite of the waves of internal and external shocks that stroke the country for decades.

The more stable political scene since 2008 has revitalized investors’ confidence in Lebanon, spurring as such investments in the various economic sectors, not only the real estate sector, and accentuating economic growth.

More particularly, capital inflows and foreign remittances

from Lebanese expatriates have reached record highs

in 2009, surpassing the $18 billion bar, of which some

$4.3 billion were channeled into Foreign Direct investments,

up from $3.6 billion in 2008. It is worth highlighting

that some 86,499 real estate transactions were booked

in the year 2009, valued at around $7 billion.

In that same perspective, foreign capital and remittances channeled into Lebanon are a major source of funds that can be exploited by the banking sector on the back of the expansionary credit policies of the Lebanese Central Bank, namely the newly promulgated Central Bank initiatives to encourage LBP lending at the expense of lowering reserve requirements for banks.

I believe that Lebanon will continue to attract foreign capital, not necessarily in the real estate sector, given that the tertiary sector of the economy (services particularly) contributes to around 65% of GDP. Hence, investments in the real estate sector will not constitute a real threat to the economy with no imminent expectations of a burst in the sector, given the scarcity of supply and space in prime locations.

What is your strategy over the next 2-3 years and what is your major challenge?

Our Bank is well positioned as a an innovator in the Lebanese banking sector, and a pioneer in introducing electronic banking services and cards operations at times when the telecommunication system was underdeveloped. Credit Libanais, as such, succeeded in establishing a state-of-the art e-banking platform and electronic points of sales (POS) network spread over some 8,761 POS and 79 Automated Teller Machines (ATMs). Credit Libanais plans to preserve its current position among its peers in the Lebanese banking sector in the near to medium term by capitalizing on its strong shareholding base, its broad branch network, a solid retail image in addition to an experienced and talented management and staff.

Credit Libanais’ corporate priority centers primarily on maintaining and improving its already strong retail image in the market, spread over a domestic network of 63 branches, a full-fledged branch in the Kingdom of Bahrain, a branch in Limassol-Cyprus, a representative office in Montreal-Canada and a newly established subsidiary bank in the Republic of Senegal, with plans to broaden the Bank’s presence in the African Market. The Bank is also striving to further develop the activities of its Cyprus branch, which can eventually serve as a hub into Europe.

The Bank is also eager to continuously expand its local operations by broadening its branch network on the scale of one branch every six months, and vertically integrating a full range of retail banking products and services, strengthening corporate banking, trade finance and capital markets services and preserving its dominant position in e-banking and e-commerce through several of the Group’s affiliates.

Concurrently, Credit Libanais like other Lebanese banks, is looking forward to support the new government initiatives to promote Private Public Partnerships (PPP) in specific sectors under the umbrella of which the risk is shared proportionally by the public and private sector, alleviating as such government public finances (namely public debt and budget deficit).

In parallel, Credit Libanais considers there is room to develop the financing of social and environmentally friendly projects in line with the new guidelines of the International Finance Corporation emphasizing on private sector sustainability.

In this atmosphere of fierce competition, regional expansion, and foreign mergers and acquisitions, our major challenge like our peers in the industry is to consider domestic consolidation at the forefront of our strategic objectives given the large number of banks (around 64) and fragmented market. Consolidation will certainly water down some of the main challenges of the Lebanese banks may face in the coming period and contribute to the welfare of the sector as a result of larger economies of scale.

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